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- All Comments on TMW
- General Discussion on TMW
- Last Week Was Dow's Worst Ever [view article]
- From The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
- Calendar Year Country Fund Returns: 1997-2007+ [view article]
- Exchange-Traded Funds and Closed-End Funds by Asset Class, Type and Provider [view article]
- Almost All U.S. Index ETFs Now in Oversold Territory [view article]
- 2Q and YTD ETF Performance Review: Large Cap, Growth Funds Lead the Way [view article]
loading ...Recent TMW Articles
- Last Week Was Dow's Worst Ever
- The 15 Basis Point Portfolio and Bobodex 10 Collide
- Calendar Year Country Fund Returns: 1997-2007+
- From The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense
- Almost All U.S. Index ETFs Now in Oversold Territory
- Five ETFs That Are as Straightforward as They Come
- 2Q and YTD ETF Performance Review: Large Cap, Growth Funds Lead the Way
- US Total Market and Broad ETFs
- Benchmarking the DJ Wilshire Global Total Market Index
- Dow At 12,500 Is Actually A Laggard
- Full List of Articles »
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Last Week Was Dow's Worst Ever [view article]
Re: "First 1000+ point high/low swing in the DJIA's history."Acutually it was the first 1000+ point low/high swing in the DJIA's history.
The low happened first.
Reply
Last Week Was Dow's Worst Ever [view article]
The dow actually had a larger weekly drop in 1913 so its actually #2 but painful nonetheless. ReplyConsidine
From The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
Ranger Ric:First "hedge like" asset classes require considerable care. I have not written about these but they are certainly worth examining. I prefer to get as much as I can get from basic asset allocation, etc. Public private equity funds are a different animal that private equity of course...I have some doubts about the viability of a public private equity stock: a lot of the argument for private equity is that a private firm can be run more efficiently than a public one--so what happens when they go public? BX and FIG do not exactly inspire confidence...
As to why Swensen does not look at utilities as an asset class: I don't know. I think that utilities look like the kind of thing he would like. This is an interesting question. Obviously I see utilities as a rather special "class."
The idea that the right portfolio changes over time is correct. In fact, the old idea among institutional investors of a permanent "policy portfolio" is quite outdated. Inst. investors increasingly revisit asset allocations and shift their portfolios as the world changes.
Reply
From The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
Geoff:I have always supported the concept on diversification and your excellent work has put some important refinements on this concept. I have three questions.
Retail investors have some ability to invest in "hedge-like" funds through long-short mutual funds and private equity through individual companies like Blackstone and Fortress and the Powershares ETF PSP. You have not discussed these alternatives in your work. Do these alternatives not adequately address the asset areas that Swenson is using or do you believe that these asset classes do not add any diversification benefits?
Why do you think that Swenson not have utilities as an asset class as you recommend?
Finally, it appears that diversification benefits are not static. You have pointed out that foreign stocks do not provide the diversification benefits today that one might expect. I believe this is due to increasing globalization. While your models make sense to me, do you see them changing over time? Reply
ocks
Calendar Year Country Fund Returns: 1997-2007+ [view article]
The Swiss ETF - EWL seems to always an average performer.Others like EWG,EWD are probably better bets. ReplyFrom The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
VFISX is Vanguard Short Term Bond fund, not an Ultra Short. Thought you may want to correct this typo. Enjoyed your article and found it very useful. Thanks. ReplyExchange-Traded Funds and Closed-End Funds by Asset Class, Type and Provider [view article]
can you please update this list? thanks. Replyts
From The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
I always look forward to your stuff. I read this one a while ago but I'm working on my CFP and ran across something similar.In studying for my CFP we are told to use CV (Coefficient of Variability) or Standard Deviation divided by Return (SDev/Ret) as a comparison tool in picking portfolios. I say your measure, Return divided by Standard Deviation, the inverse of CV, is more intuitive.
It directly, proportionally measures, as opposed to inversely measures, the thing we are looking for: stability, gain with the least pain, the biggest return-bang for the smallest risk-buck. It also directly measures the degree of foolishness we are exhibiting by believing it can be much much greater than 1 (or what the broad market action of portfolios, passive and active, tell us what is currently feasible).
Thanks for your great articles. I guess I will always be looking in the rear view mirror when investing, but your work helps me turn around and look out the front.
I used to be a deck officer in the merchant marine. When I was starting out, I can remember that on more than one occasion a captain would come up on the bridge and catch me with my head glued to the radar on a perfectly sunny, high visibility day. Then they would point to the window and shake their head at my ninnyness for not appreciating that radars, or any tools we create to measure things are all fine and good, but sometimes you need to look out the window at reality.
If the ratio you describe is unclaimed you should name it: CDS, or Considine's Coefficient of Stability. It's basically just showing the Efficient Frontier, and they already gave out the Nobel Prize for that piece of work, but they name ships after people for far less, so lay claim. And it's a hell of lot more lucid and plainspeaking way to describe the Efficient Frontier than the way it is described in my CFP textbook.
Hope you sell lots of QPP software. Maybe when I get my CFP and figure out how to use this HP10BII Business Calculator I'll be needing it. Reply
Editors
General Discussion on TMW
Is this a buy or a sell? ReplyConsidine
From The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
Pizon:Good question on taxes. In taxable accounts (obviously) it is generally better to hold individual securities and to rebalance only when the risk-return balance of the portfolio shifts outside of your desired range or when the diversification benefits shrink because of some over-concentration. This is the best approach. Many investors and advisors feel uncomfortable comparing the risk/return benefits of ETF's / index funds to a basket of individual securities because they lack the tools to really capture equivalence and risks of default in individual stocks--but that can be handled.
The average retail investor will capture the vast majority of the benefits of this kind of strategy with index funds, however, and he/she is typically not willing or unable to manage the individual securities to capture these benefits.
Geoff Reply
From The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
What is the affect of taxes using your strategy of funds (spdrs, ishares, etc.) versus owning baskets of diversified stocks in each equity asset class? ReplyFrom The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
Great piece, Geoff. Thanks for the headsup on QPP as well. ReplyConsidine
From The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
Standard deviation is relative to the expected return--so you are looking at 10.1% per year plus/minus 11.8%. That said, the plus/minus 1 standard deviation is not the extreme case. In general, only 2/3 of outcomes will fall within the average +/- 1 standard deviation. 95% of outcomes will fall withing 2 standard deviations. ReplyFrom The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
Excellent article. It is the first time I`ve seen a practical mathematical relationship between risk and reward. My question regards the use of standard deviation. In your example, are you saying that the QPP model predicts a maximum deviation of 11.6% return above and below zero return or around 10.1% return? If around 10.1%, the return could vary from -1.5% to 21.7%. Do I have this correct? ReplyFrom The Horse’s Mouth: Yale's Endowment Officer Makes Financial Sense [view article]
This is an excellent approach if only we can learn to set the course and await the results. I management "otherpeoplesmone... and they are often beyond appreciation of rationality (or Yale): "just the numbers please, and is that really your fee for these results? " Very enjoyable and well presented. Reply